The Airline industry has been beaten down since the start of the coronavirus pandemic as travel is halted to help stop the spread of the virus. The Dow Jones U.S. Airline index is down 54% year-to-date while the S&P 500 has recovered over half of its March decline which is now down 10% year-to-date. As countries begin to pass peak infection levels there may be some interesting opportunities to purchase companies that have been hit the hardest in the pandemic.
Using Trading Central’s technical event screener, I searched for U.S. airline stocks that have confirmed a bottom reversal technical pattern. Bottom reversal patterns occur after a downtrend followed by a breakout from a trading range.
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What we found
Alaska Air Group (ALK:NYSE) Prices seem to have reached a bottom, showing signs of a reversal after prices broke to the upside after a period of uncertainty (consolidation).
A Bottom Triangle shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks above the upper trendline with a noticeable increase in volume, confirming this bullish pattern as a reversal of the prior downtrend.
Delta Air Lines (DAL:NYSE) Prices reached a bottom after failing to break through a support level and have started to rise higher signaling a reversal to a new uptrend.
The Double Bottom pattern forms during a downtrend as the price reaches two distinct lows at roughly the same price level. Volume reflects a weakening of the downward pressure, tending to diminish as the pattern forms, with some pickup at each low, less on the second low. Finally, the price breaks upward above the highest high to confirm the bullish signal.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
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